Even before the disastrous events of September 11, Washington was abuzz with talk of an economic stimulus program to counter the downturn in the U.S.
economy. Unemployment was escalating and social service organizations were reporting a steadily growing demand for help. A debate began in Congress about whether some parts of the President's tax program, passed just weeks earlier, should be postponed or repealed, or whether it would be better to cut or increase federal spending.

The terrorist attacks on September 11 not only exacerbated an already-deteriorating economic situation; they created whole new groups of shattered, unemployed, homeless, and desperately needy people. Thousands were widowed or orphaned, most losing their wage earners. Within the span of a few minutes, the travel and hospitality industries in the U.S. were devastated, and millions of people whose livelihoods are in related areas will suffer profound loss. Nationwide, nearly 200,000 jobs vanished before the end of the month and many more will disappear before the end of the year, as fear and increased security measures cause people to change their normal routines.

The Coalition on Human Needs is a Washington-based alliance of national organizations with strong representation from the religious community that works on public policy issues to protect low-income people. It has published its agenda for economic stimulus that responds to both the economic downturn and the aftermath of September 11, which calls for the following:

• Expansion of the Unemployment Insurance Program to cover more low-wage and part-time workers for a longer period of time
• Improving food stamp benefits by: expanding outreach and expediting enrollment; extending eligibility to many who are not now eligible but who are being harmed by the economic downturn; and increasing food stamp allotments;
• Targeting tax relief to those most in need by extending the tax rebates received by most taxpayers last summer to those 35 million low-income workers who received either no rebate or a partial one and rebating a portion of payroll taxes to low- and middle-income workers;
• Increasing funding to the WIC (Women, Infants and Children) supplemental feeding program for low-income mothers and their small children;
• Providing federal aid to state and local governments to reverse the economic slowdown;
• Granting a temporary exception to current child support collection practices to allow more money to go to families in need. Normally, the federal government intercepts income tax refunds from non-custodial parents who are behind on their child support payments, to compensate the state and federal government for public assistance provided to the family;
• Providing a temporary increase in funding for subsidized child care so that parents looking for work can have their children cared for;
• Funding for emergency benefits and services for households that
  have lost jobs or health insurance;
• Providing subsidies for continuation of health care coverage and expanded Medicaid to low-income families experiencing unemployment;
• Increasing funding for the Low Income Heating and Energy Assistance Program to help people with fuel bills.
• Increasing the minimum wage.

The Coalition on Human Needs opposes proposals to reduce corporate and capital gains tax rates, contending that doing so would have serious long-term repercussions that could undermine the economy's ability to recover from the downturn.

Taking a conflicting position, on October 5 President Bush told the nation that "In order to stimulate the economy, Congress doesn't need to spend any more money….What they need to do is to cut taxes." In particular, he advocated accelerating the cuts in income tax rates contained in his already-passed tax bill, providing some tax relief for low-income workers, expanding tax breaks for businesses' capital expenses, and eliminating the corporate alternative minimum tax.

Critics of the President's plan are concerned that tax cuts are a slow-moving way to stimulate the economy since they generally do not take effect right away by pumping money into the economy rapidly. Instead, their benefits trickle down slowly. Another concern is that further tax cuts will simply speed up the return to federal deficit, an outcome that was almost inevitable anyway, given the size of the President's tax cut legislation. There is also concern that stimulating the economy through tax cuts for the more affluent does not work because those who receive the benefit tend to save their money, whereas spending is what is needed. Thus, putting money in the hands of low-income people is far more effective.

Senate Majority Leader Tom Daschle has said that a stimulus package of about $50 billion would be appropriate, combining tax relief for low-income people with increased spending. The Administration is willing to go as high at $75 billion, mostly in a combination of low-income and corporate tax relief. Some Democrats and moderate Republicans are concerned that the Administration's package is too large and could jeopardize future economic stability.

Shortly after September 11 Congress approved a $40 billion package of disaster relief, airline bailout, and increased defense spending. That figure, combined with the new proposals, would produce a total stimulus package in the neighborhood of $100 billion, the amount Federal Reserve Chairman Alan Greenspan has said is necessary to restart the nation's moribund economy.

The problem is that there is no agreement on either how much to spend or how to spend it. Sen. Robert Byrd (D-WV), Chair of the Appropriations
Committee, has urged giving "a lot of attention to infrastructure….It puts money into the economy quickly. It provides jobs." With so many workers losing jobs as a result of both the economic downturn and the terrorist attacks, many Democrats want to subsidize health care for the unemployed. On the other hand, conservative Republicans, feeling that President Bush has not been firm enough with Congress in restraining spending, are threatening to halt further expenditures for stimulus.

Further, there is a battle brewing over the tax part of the package. A small group of Senators led by Phil Gramm (R-TX) and Zell Miller (D-GA), are advocating a substantial business and capital gains breaks, although the President did not include capital gains in his proposal. Sen. Max Baucus (D-MT), Chair of the Senate Finance Committee, prefers accelerating
depreciation rates and giving rebates to those working Americans whose incomes are so low that they did not pay income taxes last year and therefore did not benefit from the rebates distributed this past summer. The Administration favors more extensive rebates.

At this point, the disagreement in Congress and between Congress and the Administration is such that there is little clarity about what stimulus package is likely to emerge or whether it will truly address the needs of the people who were already suffering from the economic downturn and whose lives have been made so much worse by the events of September 11.

Please see page 3 for the most recent legislative news, and our Suggested action.

Suggested Action:

On the House side: On October 12 the House Ways and Means Committee passed a stimulus bill that provides $70 billion in immediate tax breaks for corporations, while including only $2 billion in benefits for unemployed workers. This bill is scheduled for action in the House the week of October 22.

An alternative proposal, HR 3022, from Reps. Cardin (D-MD) and Houghton (R-NY) would be far more beneficial to low-income people. It would make significant and constructive changes in the Unemployment Insurance program, expanding eligibility to many not now covered. It is possible that this measure could be offered on the floor of the House as an alternative to the Ways and Means measure.

Although the House may have completed its action by the time this publication is received, it is important for House members to hear that there is support for the alternative package; and it is crucial that Senate leadership be given support for its effort to craft a bill that would genuinely assist low-income people.

On the Senate side: The Senate leadership is also working on an alternative measure. Among proposals that may be included in the leadership package is the Sarbanes (D-MD)/Reed (D-RI)/Kerry (D-MA)/Leahy (D-VT) proposal to increase funding for low-income housing and provide an additional $100 million for the Emergency Food and Shelter Program operated by the Federal Emergency Management Agency to fund short term rent, utilities and mortgage assistance for low-income households. These senators sent a letter to Sens. Daschle (D-SD) and Byrd (D-WV) on October 12, asking that they include funding for housing in the package.

From the National Low Income Housing Coalition

The Senate leadership could very well decide what will be included in the Senate's package. Urge your Senators to ask Sen. Daschle to include the Sarbanes-Reed-Kerry-Leahy housing proposal in the Senate's economic stimulus package. This could move very quickly, so please call and fax your Senators' staffers immediately. Because of the recent anthrax scares at the Senate, most Washington, D.C. offices are closed. We therefore suggest that you call your Senators' local offices instead. As you hear that the D.C. offices reopen, then follow up with a call and a fax to the D.C. housing staffer. Tell them to consider housing for low-income people:

• These households are hardest hit by economic uncertainty, and
• Housing is a proven economic stimulus. (According to a new report by the Center for Community Change, a $5 billion investment in housing production would result in the direct creation of an estimated 184,300 new jobs.

Please relay this message to your D.C. counterpoint and to the leadership - specifically to Sen. Daschle's Sioux Falls office at 605-334-9596, and next week, Jonathan Adelstein in Sen. Daschle's D.C. office at 202-224-2321. Thank you. (Get a firm commitment from the staffer to relay the message.)

Please CALL and FAX your Senators' district offices as soon as possible. For their phone and fax numbers, as well as the district office address, please take a look at the Library of Congress' website on Congress; that address is http://thomas.loc.gov/. Go to the Senate or House directory, find your members; on their homepage will be directions to the district office information.

General Assembly

On many occasions, the Presbyterian General Assembly has called for increased federal spending on programs such as WIC, child care, and other nutrition/human services programs. Perhaps the best 'stimulus' statement comes from the 1996 Assembly resolution entitled, "Eradicating Poverty and Improving the Human Habitat," where the Assembly calls for our government to "[P]rovide incentives for productive employment for the unemployed, including a livable minimum wage, job training, protection against loss of benefits for persons on welfare seeking to become self-sufficient, protection of benefits for people temporarily unemployed or in transition, and protection of pension benefits." (Minutes, 1996, p. 494)